Nova Cannabis Inc. (TSX: NOVC) reported its audited annual consolidated financial statements and management’s discussion and analysis for the year ended December 31, 2021. Nova reported that fourth-quarter sales increased 175.9% to $47.6 million over last year and was a 23.2% increase over the third quarter of 2021. The company attributed the sales growth to the continued conversion of legacy stores to the Value Buds banner throughout 2021 and the opening of new stores, particularly in Ontario.
Nova reported that net losses increased 10% in the quarter to $5 million over last year’s net loss of $3 million for the same time period. The increase in the net loss was attributed to the company recognizing a lower operating profit before depreciation, measurements, and other costs in the current year compared to the same period in the prior year and an increase in depreciation, impairments, and finance costs.
“We launched Value Buds in 2021 to provide cannabis consumers in Canada with a better option, and the traction of our store format has been a resounding success. Once again, we delivered strong sequential and year over year sales growth for the quarter and we now have 78 stores open across Alberta, Saskatchewan, and Ontario,” said Darren Karasiuk, CEO of Nova. “Following Sundial’s pending acquisition of our majority shareholder, Alcanna, we will gain a cannabis-focused partner that is committed to supporting our value-based model with the infrastructure and financial resources to drive the expansion of our disruptive strategy at a much larger scale.”
Full Year Results
Sales for 2021 were $134.4 million, a 112.2% increase from $63.3 million in 2020. The net losses for the year ballooned to $20 million from the previous year’s net loss of $2 million. The company blamed the increasing net loss to the increase in operating losses. The operating losses before depreciation, measurements, and other costs for the year were $3.6 million (2020 – $5.7 million profit). The decrease in profit was attributable to operating at a reduced gross margin as a percent of sales, increased selling and distribution expenses as a result of
operating more stores, along an increase in administrative expenses in the current year. Administrative expenses in the current year include $0.8 million in share-based payment expense, $0.5 million in severance expense, along with increases in legal and professional costs related to Nova now being a separate publicly traded corporation listed on the TSX (in the prior year it was a wholly-owned subsidiary of Alcanna).
On October 7, 2021, Sundial Growers Inc. (NASDAQ: SNDL) agreed to buy the common shares of Alcanna Inc. which is Nova’s majority shareholder. On February 25, 2022, Alcanna and Sundial mutually agreed to extend the outside date for closing the Sundial-Alcanna Transaction to March 30, 2022, in accordance with terms of the Arrangement Agreement to complete the required closing matters contemplated by the Arrangement Agreement.
Nova has seventy-eight (78) stores open, an increase of forty-four (44) stores since December 31, 2020, and all legacy Nova branded stores have been converted to Value Buds.